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Factory hiring bucks manufacturing sales weakness

Stewart Clarke uses a small mirror and flash light to inspect components inside the D-JET's engine.

Mark Spowart/The Globe and Mail

Month-on-month sales might be showing weakness, but that's not stopping Canada's manufacturers from putting out 'help wanted' signs.

Manufacturing sales unexpectedly dropped again in May, Statistics Canada said on Tuesday morning – representing the fourth sales decline in five months. But the number of jobs in manufacturing were up 2 per cent over the month, and employment in the sector has increased by 4.5 per cent since January 2012, for a total 1.8 million workers.

May's sales slipped 0.4 per cent from the previous month, which was mostly a result of a 9.6 per cent decline in sales of petroleum and coal products, which Statscan said was related to temporary shutdowns and some refineries. This came on the heels of a 1.1 per cent decline in April.

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But to put in perspective, the $6.4-billion worth of petroleum and coal sales in May is still above the $6.3-billion sold one year earlier. Manufacturers may we viewing this kind of steady annual sales growth as no reason to cut hiring.

And there's more reason for optimism when we look at annual changes in manufacturing sales as a whole: they are up 5.6 per cent compared with May 2011. In volume terms, sales were up 0.2 per cent in May compared with April – another positive sign.

Still, a relatively high inventory to shipments ratio of 1.35 in May, up from 1.32 in April, is a sign manufacturers overall are dealing with weak growth in the second quarter after a disappointing first quarter.

While the aerospace and parts industry had a good month in May, with production up 65.8 per cent to $1.5-billion, sales in that industry are still 6.5 per cent below their level 12 months earlier. And sales in more than half of the other industries Statistics Canada tracks were down on a monthly basis.

Despite a few positive signs mixed in with the headline sales weakness, some economists are still expecting May's lackluster manufacturing results to cut in to the month's GDP figure, predicting it will be around 2 per cent.

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